Thursday, December 06, 2012

Don't fear the non-existent "fiscal cliff"

President Obama's lead negotiator in the "fiscal cliff" talks said the administration is "absolutely" willing to allow the package of deep automatic spending cuts and across-the-board tax hikes to take effect Jan. 1, unless Republicans drop their opposition to higher income tax rates on the wealthy.

Treasury Secretary Timothy Geithner said in an interview with CNBC that both sides are "making a little bit of progress" toward a deal to avert the "cliff" but remain stuck on Obama's desired rate increase for the top U.S. income-earners.

"There's no prospect for an agreement that doesn't involve those rates going up on the top two percent of the wealthiest," Geithner said.

And you know why Obama and his team are willing to go off the "fiscal cliff"?

Because the president has all the leverage: He just won re-election. The Bush tax cuts are expiring, meaning he can push for popular middle-class tax cuts as part of any deal without giving up too much in terms of revenue. The Republicans are up against public opinion in promoting an extension of the Bush tax cuts for the rich, as well as cuts to Medicare and Social Security, two hugely popular programs. And Obama is much more popular than Republicans these days anyway.

Because it should be fairly easy for Obama to get what he wants without having to give up too much and without forcing the Republican leadership to accept a deal they can't sell to their party (even if the right-wing base pushes back).

As Jon Chait wrote, "[t]he effects of the fiscal cliff are cumulative, and the economic damage from waiting shortly into the New Year will probably be minimal to nonexistent." It's actually more like a low-grade fiscal slope.

And as Frank Rich said, "[t]he breathless and phony countdown to the fiscal cliff — What if they can't agree? What if we fall off? Can America possibly survive? — is media hype, a desperate effort to drum up a drama to keep viewers and readers tuned in now that the election is over. It's a Road Runner cartoon, Beltway-edition. And it's going to end with a whimper like the similarly apocalyptic, now long-forgotten Y2K scare of the turn of the millennium."

Rich continued:

Everyone knows the Republicans are going to fold — the Republicans knowthey are going to fold — and the only question to be resolved is when and on what terms. They have zero leverage. It's not only that they lost the election; they continue to decline in national polls, with the latest Pew survey showing that 53 percent of Americans will blame the GOP (and only 27 percent will blame President Obama) if there's no deal by January. The party has no national leader still standing except John Boehner, who can't even command the loyalty of his own caucus in the House. Let's hope that Obama, who is showing the admirable take-no-prisoners toughness he lacked last time around, continues on his current firm path once the Republicans start to buckle.

The president is showing every sign that he will.

There's still the Beltway media's bullshit to contend with, not to mention the hand-wringing of the "bipartisan" "centrists," and there's no guarantee the Republicans will ever go along with any deal that requires, you know, compromise, but as has been clear for a long time, to those who didn't succumb to all the nonsensical fearmongering, this is a fight Obama can, and will, win.